DISINFLATION
Disinfl ation occurs when prices are rising, but the rate of increase is slowing down. Some products and services do not increase in price as fast as others. Often, this happens when demand for a product is not thesame throughout the year. For example, in spring and summer, the price of swimsuits may be high and rising. In fall and winter, however, if the price is rising, it is doing so at a much slower rate.
REFLATION
Reflation occurs when high prices are lowered due to decreased demand, but then are restored to the previous high level. Perhaps you have heard a news reporter use this term to describe crude oil prices. Refl ation can happen when the available supply of a product, such as oil, goes up and down. Refl ation can also happenwhen consumers temporarily stop buying a product or service and then, for some reason, start buying it again. For example, when gas prices surge, people may not buy as many big cars and trucks that use more gas. They wait to see what will happen with gas prices. When gas prices fall, they begin buying large vehicles again.
DEFLATION
Defl ation is a decrease in the general level of prices for goods and services. It is the opposite ofinfl ation. In other words, prices are going down. Defl ation occurs when producers are willing and able to provide goods and services at lower prices, but due to certain events, consumers are buying less. Some products go down in price over time even when the market as a whole is not experiencing a period of defl ation. For example, a computer that uses a new, faster processor may sell at a high price when it fi rst comes on the market. A year later, the same computer may sell for hundreds of dollars less. The price is lower because it is no longer the newest, fastest computer available. Other, newer models have been released.
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